fc 


ilTY  OF  CALIFORNIA 
LOS  ANGELES 


OVER-PRODUCTION 


AND 


COMMERCIAL    DISTRESS. 


BY 


URIEL   H.    CROCKER. 


There  is  that  scattereth,  and  yet  increasetb;   and  there  is  that  withholdeth  more 
than  is  meet,  but  it  tendeth  to  poverty.  —  Proverbs  xi.  24. 


BOSTON 

(  i.  a  RK1      \  \  I)    <    \  i;  i:  i    in. 

,  i  w  \-hi ■<■. roa  Stbbbt. 
1-7. 


•       •  •  • 
•   •        * 
•     •        • 


,      .   . 


University  Phess: 
John  Wilson  and  Son,  Cambridge. 


H3 

3  7  I  I 

2     V 


PREFACE. 


""HE  pages  here  presented  to  the  public  contain 
a  revised  and,  it  is  hoped,  an  improved  state- 
ment of  certain  views  and  arguments  previously  set 
5:  forth  by  the  author  in  a  pamphlet  published  in  1886, 
and  entitled:  "The  Depression  in  Trade,  and  the 
Wages  of  Labor."  Similar  views  and  arguments 
have  been  the  subject  of  various  communications  to 
newspapers  and  periodicals,  written  by  the  author  dur- 
ing the  last  ten  years,  and  collected  and  published 
by  him  in  1884  in  a  pamphlet  entitled:  "Excessive 
Saving  a  Cause  of  Commercial  Distress." 

URIEL    H.   CROCKER. 
Boston,  October,  1887. 


386440 


OVER-PRODUCTION 


XD 


COMMERCIAL     DISTRESS. 


"^HE  general  and  widespread  depression  in  trade 
which,  with  the  exception  of  short  intervals  of 
business  prosperity,  has  now  continued  since  1873, 
has  given  rise  to  much  discussion.  The  phenomena 
which  are  the  evidences  of  this  depression  have  been 
generally    recognized,   and    people    are    in    the    main 

eed  as  to  their  character.  Few  persons  will  deny 
thai  during  a  large  portion  of  the  period  referred  to, 
more  products  of  almost  every  description  have  been 
created  thau  it  has  been  possible  to  dispose  of  at  a 
profit  over  the  cost  of  production.  Among  the  so- 
called  raw  materials,  more  iron,  coal,  cotton,  and 
wheal     have    been    produced    than    the    market    has 

nidi  to  call  for.  while  of  manufactured  products 
greater  quantities  have  in  many  cases  hern  supplied 
by  thr  factories  than  could  be  sold,  except  at  a  loss  i<> 
the  owners  of  the  Factories.  It  has  been  the  general 
complaint  among  tradesmen  thai    the  margin  of  profii 


derivable  from  business  has  been  small,  and  among 
capitalists  that  they  could  find  for  their  funds  no 
investments  which  promised  favorable  returns. 

These  phenomena,  however,  might  not  have  called 
for  serious  attention,  except  for  certain  other  phe- 
nomena by  which  they  have  been  accompanied.  In 
the  midst  of  all  these  evidences  of  plenty,  in  the 
midst  of  an  abundance  of  the  products  of  the  earth 
and  of  labor,  large  numbers  of  the  laboring-classes, 
though  ready  and  eager  to  work,  have  often,  by  rea- 
son of  the  lack  of  any  demand  for  their  services,  been 
compelled  to  sit  in  idleness,  surrounded  by  an  abun- 
dance in  Avhich  they  had  no  share.  This  has  certainly 
been  a  condition  of  affairs  demanding  attention  from 
the  student  of  political  science,  —  a  condition  in  which 
general  abundance  has  existed  only  to  cause  general 
embarrassment,  in  which  the  rich  have  been  com- 
plaining of  the  abundance  because  it  has  prevented 
them  from  disposing  of  their  goods  at  a  profit,  and 
the  poor  have  been  complaining  likewise,  not  only 
because  the  abundance  has  caused  their  labor  to  be 
unsought,  but  also  because  it  has  spread  before  them, 
as  before  the  eyes  of  Tantalus,  the  things  which  they 
longed  for,  but  were  not  permitted  to  touch.1 

1  The  Keport  of  the  minority  of  the  recent  Commission  on  the  De- 
pression of  Trade  and  Industry  in  England  clearly  recognizes  these 
facts.  This  Report  says  (paragraph  57):  "  The  great  difficulty  consists 
no  longer,  as  of  old.  in  the  scarcity  and  dearness  of  the  necessaries  and 
conveniences  of  life,  but  in  the  struggle  for  an  adequate  share  of  that 
employment  which  affords  to  the  great  bulk  of  the  population  their  only 
means  of  obtaining  a  title  to  a  sufficiency  of  those  necessaries  and  con- 
veniences, however  plentiful  and  cheap  they  may  be.  Without  that 
adequate  share  of  employment,  increasing  masses  of  the  people  must 


Many  theories  to  account  for  these  unusual  phe- 
nomena have  been  proposed.  In  this  country  it  has 
been  said  that  the  trouble  has  been  due  to  our 
protective  tariff,  which,  it  is  claimed,  has  limited 
the  market  for  the  sale  of  our  products.  But  the 
fact  that  the  depression  has  been  felt  even  more 
Beverely  in  free-trade  England  than  in  the  United 
States,  indicates  that  this  theory  cannot  be  the  true 
one.  In  England,  on  the  other  hand,  it  has  been 
urged  that  the  trouble  has  been  due  to  the  free- 
trade  policy  of  that  country,  which  has  flooded  it 
with  the  products  of  other  nations.  But  those  who 
urge  this  view  forget  that  the  United  States,  whose 
policy  has  been  to  exclude  foreign  products,  have 
been  suffering  from  the  same  trouble,  though  proba- 
bly in  a  less  degree. 

The  professors  of  political  economy  have  told  us, 
in  the  language  of  Professor  Bonainy  Price  in  the 
"Contemporary  Review'  for  April,  1877,  that  the 
cause  of  our  trouble  u  is  one  and  one  only,  —  over- 
spending, over-consuming,  destroying  more  wealth 
than  is  reproduced;  and  its  necessary  consequence, 
poverty."     But  if  we  have  been  suffering  from  past 

a  precarious  and  miserable  existence  in  the  midst  of  plenty,  no 
matter  what   the  increase  of  the  total  wealth  of  the  nation." 

In  the  tinted  States  the  Buffering  from  want  of  employment  has  not 

re  as  elsewhere;  but  in  the  First  Annual  Ete- 

of  our  National  Buret t  Labor,  the  commissioner  (Hon.  Carroll  D. 

Wright)  estimates  thai  during  the  year  ending  July  1.  1885,  there  were 
in  the  l  nited  States  a  million  of  people  who  were  seeking  employment, 
were  unable  to  and  it;  and  he  adds:  "A  million  of  people  out  of 
employment,  crippling  all  dependeut  upon  them,  means  a  loss  to  the  con- 
■umptive  po  I  the  country  of  at  leasl  $1,000,000. 00  per  day,  or  a 
crippling  of  the  trad.-  of  the  country  of  o  I, 1,000.00  per  year." 


8 

extravagance,  if  we  have  been  "destroying  more 
wealth  than  is  reproduced,"  surely  we  ought,  as  a 
result,  to  have  found  ourselves  in  the  midst  of  a 
scarcity  rather  than  an  abundance  of  the  products 
of  labor,  and  instead  of  there  being  any  difficulty 
in  finding  employment  for  all  who  wish  to  labor, 
every  one  ought  to  have  plenty  to  do,  and  to  be 
hard  at  work  in  making  good  the  waste  of  the  past. 
Indeed  this  theorv  is  so  far  at  variance  with  the 
facts  that  it  seems  now  to  have  been  abandoned. 

Another  favorite  theory  with  the  economists  has 
been  that  the  trouble  has  been  due  to  mis-produc- 
tion ;  or,  in  other  words,  to  a  foolish  over-production 
of  some  things,  while  there  has  been  a  corresponding 
under-production  of  other  things.  But  this  theory 
also  may  fairly  be  set  aside  as  unsatisfactory,  unless 
those  who  advance  it  are  able  to  point  out,  as  it  is 
evident  they  cannot  do,  what  the  articles  are  that 
have  not  been  produced  in  quantities  sufficient  to 
meet  the  demands  of  the  times,  or  at  least  to  ex- 
plain how  it  is  that,  if  there  is  any  considerable 
amount  of  under-production  (corresponding  to  the 
evident  over-production  of  many  articles),  the  many 
shrewd  and  watchful  capitalists,  whose  money  has 
been  lying  idle  for  want  of  investment,  have  not 
used  their  funds,  and  why  the  many  laborers,  who 
have  failed  of  employment,  have  not  employed  their 
labor  in  relieving  the  scarcity  of  the  under-produced 
articles ;  scarce  articles  or,  in  other  words,  articles  the 
demand  for  which  is  in  excess  of  the  supply,  being 
exactly  what  all  men,   capitalists   and   laborers   alike, 


9 

have  in  recent  years  been   endeavoring,   though   sel- 
dom with  success,  to  discover. 

Another  theory  has  traced  all  the  trouble  to  the 
disinclination  of  the  business  community  to  engage  in 
new  enterprises  by  reason  of  a  fear  that  the  continued 
coinage  of  silver  would  lead  to  a  shifting  of  our  cur- 
rency from  a  gold  to  a  silver  basis,  whereby  the  value 
of  the  dollar  would  be  diminished  by  some  twenty  per 
cent,  and  much  confusion  and  disaster  thereby  brought 
upon  all  kinds  of  business.  The  objections  to  this 
theory  are  numerous.  In  the  first  place,  the  most 
active  business  men  usually  trade  on  borrowed  capital, 
and  the  prospect  that  they  would  be  able  to  pay  their 
debts  in  a  depreciated  currency  would  naturally  induce 
them  to  extend  rather  than  to  diminish  their  opera- 
tions. In  the  second  place,  common  observation  of  the 
talk  of  business  men  shows  that  the  prospect  of  trouble 
from  this  cause  has  been  to  their  minds  too  remote  to 
influence  largely  their  conduct.  And  thirdly,  those 
who  are  accustomed  to  loan  money,  although  they  are 
the  class  who  arc  sure  to  suffer  from  a  depreciation  of 
the  currency,  and  although  they  are  always  on  the 
look-oul  tor  symptoms  of  a  coming  depreciation,  have 
not  frit  thai  the  danger  of  such  a  result  was  greal 
enough  to  prevenl   them  from  loaning  their  funds  at 

Ve|-\'   low    PateB   of    interest,    or    tO    lead     them,  except     in 

rare  instances,  to  insist,  when  making  a,  loan,  thai  the 
borrower  should  agree  to  repay  it  in  gold. 

Finally,   a     th •y    which    is   in    some    respects    more 

plausible  than  any  of  those  before  mentioned,  has  re- 
cently been  advanced  by  the  economists.     This  theory 


10 

represents  the  depression  in  trade  to  be  due  to  the  de- 
monetization of  silver,  which,  by  increasing  the  value 
of  gold,  has  diminished  the  value,  as  measured  in  dol- 
lars, pounds  sterling,  or  francs,  of  all  other  articles,  and 
thus  has  discouraged  and  depressed  trade  by  giving  it 
a  continually  falling  market  for  all  kinds  of  merchan- 
dise. With  regard  to  this  theory  it  may  be  remarked, 
in  the  first  place,  that  the  improved  methods  and  in- 
creased facilities  for  exchange  and  for  the  payment  of 
debts  without  the  actual  use  of  gold  or  silver,  which 
have  been  brought  about  in  recent  years,  must  have 
gone  very  far  to  counteract,  if  they  have  not  more  than 
counterbalanced,  any  tendency  in  gold  to  increase  in 
value.  Secondly,  a  falling  market  was  a  result  which 
might  naturally  have  been  expected  to  follow  a  cause 
very  different  from  that  suggested  by  those  who  advance 
this  theory.  A  falling  market  was  a  necessary  result 
of  the  cheapening  of  products  caused  by  the  great  in- 
crease which  has  taken  place  in  the  effectiveness  of  the 
machinery  of  production  and  distribution,  and  which 
has  largely  reduced  the  price  of  every  article  that  is 
produced  by  machinery  or  transported  by  railroad  or 
steamship.  Indeed,  we  may  well  wonder  that  a  fall  in 
prices,  greater  than  that  which  has  actually  been  ex- 
perienced, has  not  been  brought  about  by  our  factories, 
railroads,  and  steamships.  A  third  objection  to  this 
theory  is  to  be  found  in  the  fact  that  the  demonetiza- 
tion of  silver  could  have  increased  the  value  of  gold 
only  by  increasing  the  demand  for  the  latter  metal ; 
and  that  during  the  time  when  this  demand  was  in- 
creasing,  those  who  felt  the  increasing  want  of  gold 


11 

must  have  been  willing  to  pay  more  liberally  than  be- 
fore for  the  use  of  it,  —  in  other  words,  must  have  been 
ready  to  agree  to  pay  higher  rates  of  interest  when 
they  borrowed  it.  Under  these  circumstances  the  gen- 
eral rate  of  interest  would  have  tended  to  be,  for  the 
time,  higher  than  it  had  previously  been.  But  as  a 
matter  of  fact,  the  last  ten  years  have  been  notable, 
not  for  high,  but  for  low,  rates  of  interest.  None  of 
the  usual  symptoms  of  a  scarcity  of  money  have  been 
observed.  Speculators  and  the  debtor  class  have  not 
been  specially  embarrassed.  There  has  been  no  un- 
usual number  of  failures,  and  no  general  want  of  confi- 
dence in  the  solvency  of  the  business  community.  For 
these  reasons,  this  theory,  like  the  others,  fails  to  meet 
the  conditions  of  the  problem.1 

It  is  quite  common  for  those  who  write  concerning 
the  causes  of  the  depression  in  trade  to  begin  their 
essays  on  the  subject  with  some  remark  to  the  effect 
that  many  people  suppose  the  trouble  to  be  due  to 
general  over-production,  but  that  any  such  idea  as 
that  could  be  entertained  only  by  ignorant  persons, 
who,  if  they  were  acquainted  with  the  simplest  prin- 
ciples of  political  economy,  would  know  that  general 
over-production  is,  in  the  nature  of  things,  an  absolute 
impossibility.2     When  the  theories  of  the  learned  con- 

1  The  objections  to  this  theory  have  been  very  well  stated  in  an  article 
by  Dr.  Th.  Barth,  in  the  Berlin  "  Nation  "  <>f  Dec.  5,  1885, a  translation 
of  which  article  appeared  in  the  •'  New  York  Evening  Post  "  of  Dec.  30, 
l--:.. 

2  Thus,  in  an  article  by  Moreton  Frewen  on  "  Gold  Scarcity  and  the 
1  depression  "f  Trade,"  in  the  "  Nineteenth  Century"  for  October,  1885, 
%ve  read:  "  People  of  little  education  are  accounting  for  low  prices  on  tin' 
hypothesis  of  :i  general  over-production ;  but  it  is  hardly  necessary  to  point 


12 

flict  with  popular  ideas,  it  sometimes  turns  out  in  the 
end  that  the  learned  were  wrong,  and  the  people  right, 
—  that  the  finely  drawn  arguments,  on  which  the 
former  built  their  theories,  involved  fallacies  fatal  to 
the  truth  of  their  conclusions,  while  the  rougher  rea- 
soning processes  of  the  latter  led  them  by  a  sort  of 
instinct  to  true  results. 

By  general  over-production  is  meant,  not  a  production 
in  excess  of  mankind's  readiness  to  consume,  if  products 
were  to  be  distributed  gratuitously,  but  a  production 
in  excess  of  the  demand  which  is  backed  by  both  the 
inclination  to  acquire  and  the  ability  to  pay  for  the 
things  demanded  ; 1  and  those  who  claim  that  such  over- 
out  that,  while  over-production  in  any  particular  trade  is  frequent,  and 
quickly  adjusts  itself,  general  over-production  is  impossible."  And  Mr. 
Edward  Atkinson,  in  an  address  on  the  "  Statistics  of  Consumption," 
printed  in  the  Boston  "  Sunday  Herald  "  for  July  5,  1885,  says:  "  I  desire 
to  examine  the  outside  of  the  head  of  any  one  who  pleads  a  general  over- 
production, in  order  to  see  how  his  brain  is  constituted,  and  what  element 
of  common-sense  has  been  omitted  in  his  make-up." 

1  That  it  may  not  be  supposed  that  this  use  of  the  words  "general 
over-production  "  is  peculiar  to  the  writer  of  these  pages,  the  follow- 
ing quotation  from  Mill's  "Elements  of  Political  Economy"  is  given: 
"Because  this  phenomenon  of  over-supply  and  consequent  inconvenience 
or  loss  to  the  producer  or  dealer  may  exist  in  the  case  of  any  one  com- 
modity whatever,  many  persons,  including  some  distinguished  political 
economists,  have  thought  that  it  may  exist  with  regard  to  all  commodi- 
ties, —  that  there  may  be  a  general  over-production  of  wealth,  a  supply  of 
commodities  in  the  aggregate  surpassing  the  demand,  and  a  consequent 
depressed  condition  of  all  classes  of  producers.  .  .  .  There  may  easily  be 
a  greater  quantity  of  any  particular  commodity  than  is  desired  by  those 
who  have  the  ability  to  purchase,  and  it  is  abstractly  conceivable  that  this 
might  be  the  case  with  all  commodities.  The  error  is  in  not  perceiving 
that  though  all  who  have  an  equivalent  to  give  might  be  fully  provided 
with  every  consumable  article  which  they  desire,  the  fact  that  they  go  on 
adding  to  the  production  proves  that  this  is  not  actually  the  case."  — 
"  Elements  of  Political  Economy,"  by  John  Stuart  Mill,  Book  III.,  ch.  xiv, 
sections  1  and  3. 


13 

production  is  possible,  certainly  have  an  appearance  of 
facts  in  their  favor.  They  say  that  it  is  possible,  be- 
cause it  has  actually  existed ;  and  as  evidence  of  the  truth 
of  this  assertion  they  point  to  the  fact  that  the  chief 
producers  in  every  branch  of  industry  (and  these  men 
may  well  be  supposed  to  be  acquainted  each  with  the 
state  of  the  market  for  his  own  products)  have  long 
been  asserting  that  in  their  respective  lines  of  business 
there  has  been  an  evident  over-production.  Factory- 
owners  have,  for  this  reason,  been  working  their  fac- 
tories below  their  full  capacity,  and  have  endeavored 
to  reduce  the  aggregate  of  production  by  agree- 
ments with  others  in  the  same  business,  whereby  the 
products  of  each  should  be  limited  to  a  prescribed 
amount.  If  there  has  been  evident  over-production  in 
all  the  more  important  branches  of  business,  what  can 
be  the  brandies  in  which  there  has  been  an  amount  of 
under-production  sufficient  to  redress  the  balance  and 
leave  the  world  with,  on  the  whole,  no  excess  of  pro- 
duction beyond  the  demands  of  the  market?  Unless 
such  instances  of  under-production  can  be  pointed  out, 
it  is  evident  that  general  over-production,  as  an  act  mil 
and  existing  fact,  must  be  admitted.1 

1  Among  the  evidences  of  the  actual  existence  of  this  over  production 
we  may  refer  t"  l>"th  tie-  majority  and  minority  Reports  of  the  English 
"Commission  on  the  Depression  of  Trade  ami  Industry."  The  majority 
Report  -ays  (paragraphs  61  66):  -  One  of  the  coramonesl  explanations  of 
this  depression  or  absence  of  profit  is  thai  known  under  tin-  name  of  '  over- 
production;' by  which  we  understand  the  production  of  c modi  ties,  or 

even  the  existence  of  a  capacity   tor  production,  at  a  time  when  the  i\>- 

mand  i-  not  sufficiently  brisk  to  maintain  a  remunerative  price  to  the  pro- 
ducer, and  to  afford  him  an  adequate  return  on  his  capital.     We  think 
thai  Buch  an  over-production  ha-  been  one  of  the  prominent  featun 
the>  during  recent  years,  and  that  the  depression  under 


14 

If,  then,  general  over-production  is  apparently  an 
existing  fact,  it  will  be  well  to  examine  the  argu- 
ment which  has  been  supposed  to  prove  it  to  be  in 
the  nature  of  things  an  impossibility.  The  argument 
upon  which  all  modern  economists  rest  for  this  proof 
is  that  which  was  furnished  many  years  ago  by  John 
Stuart  Mill,  and  is  in  substance  as  follows :  No  man 
labors  to  produce  anything  unless  he  expects  either  to 
consume  it  himself  or  to  exchange  it  for  something; 
else  which  he  expects  to  consume.  In  other  words,  pro- 
duction never  exists  unless  an  equivalent  demand  for 
consumption  exists  at  the   same  time ;   and   therefore 

which  we  are  now  suffering  may  be  partially  explained  by  this  fact.  .  .  . 
The  remarkable  feature  of  the  present  situation,  and  that  which  in  our 
opinion  distinguishes  it  from  all  previous  periods  of  depression,  is  the 
length  of  time  during  which  this  over-production  has  continued.  A  tem- 
porary excess  of  supply  over  demand  will  naturally  occur  from  time  to 
time  in  the  case  of  all  commodities.  .  .  .  But  it  is  more  difficult  to  account 
for  systematic  over-production  continued  during  a  long  period,  and  re- 
sulting, according  to  the  unanimous  testimony  of  the  witnesses  who 
appeared  before  us,  in  little  or  no  profit  to  the  producing  classes." 

Similar  statements  may  be  found  in  the  Report  of  the  minority  of  the 
Commissioners.  That  Report  says  (paragraphs  71-75) :  "  One  of  the  com- 
monest explanations  of  the  depression  of  trade  and  absence  of  profit  is 
that  which  attributes  it  to  over-production ;  by  which  we  understand  the 
production  of  commodities  (or  existence  of  the  agencies  of  production)  in 
excess,  not  of  the  capacity  of  consumption,  if  their  distribution  were 
gratuitous,  but  of  the  demand  for  export  at  remunerative  prices,  and  of 
the  amount  of  income  or  earnings  available  for  their  purchase  in  the  home 
market;  that  is,  of  profitable  employment  for  the  population.  The  de- 
pression under  which  we  have  so  long  been  suffering  is  undoubtedly  of 
this  nature.  .  .  .  The  remarkable  feature  of  the  present  situation,  and 
that  which,  in  our  opinion,  distinguishes  it  from  all  previous  periods  of 
depression,  is  the  length  of  time  during  which  this  over-production,  or 
existence  of  the  capacity  of  over-production,  has  continued.  There  must 
be  some  special  cause  for  systematic  over-production,  or  over-provision  of 
the  agencies  of  production,  continued  during  so  long  a  period,  and  result- 
ing, according  to  the  unanimous  testimony  of  the  witnesses  who  appeared 


15 

production  can  never  exceed  in  amount  that  demand 
for  consumption,  —  can  never  be  developed  into  gen- 
eral over-production.  According  to  Mill,  those  who 
assert  the  possibility  of  general  over-production  are 
involved  in  the  absurdity  of  assuming  that  people 
will  go  on  producing  articles  which  they  do  not  ex- 
pect to  use  themselves,  or  to  exchange  for  other 
articles  which  they  do  expect  to  use ;  and  their  error 
lies  —  to  quote  his  own  words  —  "in  not  perceiving 
that,  though  all  who  have  an  equivalent  to  give 
might  be  fully  provided  with  every  consumable  ar- 
ticle   which    they    desire,   the   fact    that   they   go    on 

before  us,  in  an  entire  absence  of  profit  on  large  classes  of  commercial 
operations." 

Again,  this  Report  says  (paragraph  106):  "  We  have  shown  .  .  .  that 
the  demand  for  commodities  does  not  increase  at  the  same  rate  as  for- 
merly, and  that  our  capacity  for  production  is  consequently  in  excess  of 
our  home  and  export  demand,  and  could,  moreover,  be  considerably  in- 
creased at  short  notice  by  the  fuller  employment  of  labor  and  appliances 
now  partially  idle." 

Hon.  Carroll  D.  Wright,  in  his  Report  before  referred  to,  says  (p. 
254):  "  It  is  apparent,  from  the  statistical  illustrations  given  in  the  pre- 
ceding chapters,  that  the  family  of  manufacturing  states,  Great  Britain, 
France,  Belgium,  Germany,  and  the  United  States,  if  not  also  Austria, 
Russia,  and  Italy,  are  suffering  from  an  industrial  depression,  novel  in 
its  kind,  and  yet  having  characteristic  features  of  similarity  throughout 
the  whole  range  of  states.  It  seems  to  be  quite  true  that  in  those  states 
the  volume  of  business  and  of  production  has  not  been  affected  disastrously 
by  the  depressii  m,  but  that  prices  have  been  greatly  reduced,  and  margins  of 
profits  carried  to  the  minimum  range.  Over-production  seems  to  prevail  in 
all  alike,  without  regard  to  the  system  of  commerce  which  exists  in  either." 

And  again,  on  p.  261:  "The  besl  European  authorities  agree  that 
the  circle  of  producing  nations  bas  been  so  enlarged  as  to  make  the  means 
of  production  far  in  excess  of  the  i Is  of  consumption." 

The  evidences  of  general  over-production  are  also  Bet  forth  with  much 
detail  in  the  articles  on  "The  Economic  Disturbances  Bince  1873,"  l>v 
Hon.  David  A.  Wells,  now  appearing  in  the  "  Popular  Science  Monthly" 
and  in  the  "Contemporary  Review." 


16 
adding  to  the  production  proves  that  this  is  not  the 


case." * 


As  applied  to  a  simple  state  of  society,  where  pro- 
ducts are  created  without  much  division  of  labor  and 
without  much  aid  from  machinery,  the  application 
and  the  force  of  this  argument  can  readily  be  seen. 
Where  one  man  makes  hats,  another  coats,  another 
boots,  another  raises  wheat,  another  bakes  bread,  and 
so  on,  through  the  varied  round  of  industries,  it  is 
evident  that  the  maker  of  hats  will  work  only  so 
long  as  he  may  be  in  want  of  and  intending  to  ob- 
tain —  as  soon  as  by  the  sale  of  hats  he  shall  have 
supplied  himself  with  the  means  of  purchase  —  other 
consumable  articles ;  namely,  coats,  boots,  bread,  etc. 
As  under  these  circumstances  the  production  of  con- 
sumable articles  is  called  into  action  only  by  the 
desire  and  intention  of  the  producer  forthwith  to  ob- 
tain other  consumable  articles,  the  demand  for  con- 
sumption must  always  be  as  large  as  the  production. 

Such  a  simple  state  of  society,  however,  no  longer 
exists.  Modern  society  has  brought  in,  to  complicate 
the  problem  which  Mill  attempted  to  solve,  at  least 
one  new  and  important  element ;  namely,  the  immense 
amount  of  machinery  which  now  increases  a  hundred- 
fold the  effectiveness  of  human  labor.  And  the  use 
of  machinery  has  had  one  curious  effect  which  Mill 
entirely  overlooked ;  namely,  that  its  owner  finds  an 
inducement  to  employ  it  in  the  production  of  con- 
sumable articles  even  when  he  has  no  hope  or 
expectation  that  he   can  by   such    production   supply 

i  See  Mill's  Elements  of  Political  Economy,  Book  III.,  ch.  xiv. 


17 

himself,   directly  or    indirectly,   with    any   consumable 
article   for   his   own  use.      The   factory-owner,   for   in- 
stance, has  upon  his  hands  a  piece  of  property  which, 
if  idle,  will  involve   him   in  continual  expense  for   its 
care   and   its   protection  from  the   weather,  from  fire, 
and   from   thieves,   and  which,  in  spite  of  all  that  he 
can   do  to  preserve  it,  will  rapidly  deteriorate  through 
rust  and   decay.     The  owner  of  an   idle  factory  must 
also   suffer    a   further    injury   from    losing    the   skilled 
workmen    who     have    been     accustomed     to    run    his 
machinery,  and  from  forcing  the  customers,  who  have 
been  in  the  habit  of  buying  his  products,  to  patronize 
rival    manufacturers ;    for   to   fill    the    places  of  those 
workmen  and  to  find  new  customers,  when  his  factory 
starts  up  again,  must  necessarily  involve  him  in  great 
trouble  and    expense.     Thus  we  see  that  the  owners 
of    machinery  —  a   large    and    powerful    body   in    the 
modern  world  —  have  a  sufficient  inducement  to  "go 
on  adding    to    the    production  '     even   when    they   are 
••  fully  provided  with   every   consumable  article  which 
they  desire."     In  order  to  avoid  the  loss  which  must 
necessarily  come  to  them  if  their  machinery  is  allowed 
to   renin  in    idle,   they   will   employ   that   machinery  in 
production  even  when  they  know  that  the  articles  pro- 
duced must    he  sold   for  less   than   the  cost  of  produc- 
tion.    They  will   produce  simply  in  order  to  save  what 
they   already    possess,  and  with  no  thought  or  hope  to 
gain  anything  which  they  desire,  hut   do  not   possess. 
Production,  therefore,  is  found  to  have  a  possible  origin 
in  :i  source  other  than  the  desire  to  obtain  consumable 
articles;    and    .Mills   argument    fulls  to  the  ground  as 


18 

completely  as  it  would  if  men  had  begun  to  labor  for 
production  merely  from  a  love  of  exercise  and  with  no 
care  for  the  products  of  their  labor. 

Not  only  is  it  possible,  theoretically,  that  men  may 
thus  labor  and  produce  without  any  purpose  or  hope 
thereby  to  acquire  consumable  articles  for  their  own 
use,  but  it  is  evident  that  during  recent  years  much 
machinery  has  in  fact  been  run  without  profit,  or  at 
a  loss,  to  its  owners,  —  run  simply  because  those  own- 
ers believed  that  they  would  suffer  a  smaller  loss  if 
they  should  continue  to  run  it  than  if  they  should 
allow  it  to  lie  idle.  It  has  in  recent  years  been  a 
matter  of  common  observation  that  most  kinds  of 
machinery  have  been  created  of  a  capacity  in  excess 
of  the  demands  of  the  market  for  the  products  which 
the  machinery  has  been  adapted  to  produce.  There 
has  been  hardly  a  branch  of  manufacture,  open  to  free 
competition,  in  which  the  machinery  has  not  within 
the  last  ten  years  been  run  for  long  periods  at  a  loss, 
simply  because  its  owners  have  hoped  to  "kill  off" 
rival  manufacturers,  to  "hold  the  market"  in  antici- 
pation of  better  times,  or  to  avoid  the  deterioration 
and  expense  necessarily  attendant  upon  idleness ;  and 
there  is  hardly  any  branch  of  manufacture  to-day  — 
unless  it  is,  through  a  patent  right  or  otherwise,  in  the 
enjoyment  of  a  monopoly  —  which  is  not  endeavor- 
ing to  limit  production  by  all  sorts  of  mutual  agree- 
ments, known  as  "pools,"  "trusts,"  etc.,  and  thereby 
to  prevent  the  continuance  or  recurrence  of  the  troubles 
which  it  has  experienced  and  of  the  losses  which  have 
resulted  from  the  excessive  amount  of  its  machinery 


19 

and  from  its  general  capacity  of  production  in  excess 
of  the  demands  of  the  market. 

If,  then,  general  over-production  is  not,  as  Mill  and 
the  economists  generally  have  supposed  it  to  be,  a 
natural  impossibility,  but  a  condition  of  affairs  which 
might  reasonably  be  expected  to  result  from  causes 
that  we  know  to  be  at  the  present  time  active  and  pow- 
erful, it  becomes  important  to  consider  whether  the 
phenomena  which  constitute  what  is  known  as  the 
depression  in  trade  are  such  as  might  naturally  have 
grown  out  of  a  general  over-production. 

As  has  been  before  stated,  the  most  noticeable  phe- 
nomena involved  in  the  recent  depression  have  been, 
first,  the  supply  of  manufactured  products  in  excess 
of  the  demands  of  the  market ;  second,  the  inabil- 
ity of  the  laboring-classes  to  find  employment ; 
and  third,  the  loss  of  income  by  the  rich,  and  of 
wages  by  the  poor,  and  the  general  decline  in  the 
profits  derivable  from  all  kinds  of  business.  Over- 
production plainly  accounts  for  the  excessive  supply 
of  products;  but  the  manner  in  which  the  other  phe- 
nomena mentioned  have  arisen  out  of  over-produc- 
tion calls  tor  .some  explanation.  This  explanation, 
however,  it  is  not  difficult  to  give.  It  is  a  matter  of 
common  observation  that  whenever  articles  are  pro- 
duced in  excess  of  the  market  demand  for  them, 
there  must  result  a  competition  among  the  different 
owners  of  those  articles,  whereby  prices  will  be  re- 
duced and  profits  destroyed;  and  thai  soon  the  I 
able  or  less  enterprising  producers  musl  bo  driven  t<> 
abandon    production,    and    thereby    to    throw  out    of 


20 

employment  the  laborers  who  had  previously  worked 
for  them.  At  the  same  time  the  fact  that  the  owners 
of  the  existing  machinery  of  production  and  distri- 
bution cease  to  derive  their  usual  income  from  that 
machinery,  must  tend  to  stop  the  building  of  new 
machinery ;  and  thus  large  numbers  of  men,  ordinarily 
employed  in  the  erection  of  new  factories,  the  build- 
ing of  new  railroads,  etc.,  must  find  that  they  too 
have  lost  their  employment.  In  these  facts  we 
have  a  simple  explanation  of  the  manner  in  which 
general  over-production  must  necessarily  bring  about 
a  loss  of  employment  and  of  wages  for  the  laboring- 
classes,  and  a  loss  of  income  for  the  rich  ;  and  when 
both  rich  and  poor  have  lost  their  usual  ability  to 
purchase  such  consumable  articles  as  they  may  desire, 
it  is  plain  that  all  kinds  of  business  must  be  depressed, 
for  the  profits  of  business  must  depend  upon  the 
number  of  customers  and  upon  their  ability  and  will- 
ingness to  purchase. 

If  general  distress  and  embarrassment  have  thus 
been  caused  by  the  attempt  of  the  owners  of  the 
world's  vast  amount  of  machinery  to  save  themselves 
from  the  losses  which  must  necessarily  arise  out  of  the 
excess  of  the  capacity  of  that  machinery  for  production 
beyond  the  demands  of  the  market  for  the  products,  an 
interesting  question  arises  as  to  the  causes  which  have 
called  into  being  this  excessive  amount  of  machinery. 
These  causes,  however,  are  not  difficult  to  discover. 

In  recent  years  there  has  been,  in  the  principal 
nations  of  the  world,  an  almost  universal  struggle 
among    men    to    obtain    what  we   may    call    income- 


21 

producing  investments;  that  is,  investments  which  will 
during    future    years    render  annual    returns    to    their 
owners,  and  thereby  enable  those  owners  to  avoid,  in 
whole  or  in   part,  the  burden  of  labor  for  their  daily 
support.       Such     investments    necessarily    consist    in 
the    main,    either    directly    or   indirectly,   of   the    ma- 
chinery of  production  and  distribution,  —  of  factories, 
warehouses,    railroads,    steamboats,   etc.     The    acquisi- 
tion of  these  income-producing  investments  has  been 
thought   to   be  almost,   if  not  quite,  the   chief  end  of 
man.     The    most   generally  accepted  gospel  of  these 
latter   days  has  been  that  of  economy,  and   the   duty 
most   urged    upon   men   from   the  Pulpit  and    by   the 
Press   has    been    that    of    saving    rather    than    spend- 
ing,—  the    duty   of  self-denial   of  present   enjoyment 
of  the   good   things  of  life,  in  order  to  accumulate   a 
store   of  good   things   or   a   means   of  acquiring  good 
things  in  the   future.     No   man    has  been   thoroughly 
respected  by   his  neighbors   unless  he  has,   according 
to  his  means,  been  adding  to   his  store  of  income-pro- 
ducing   investments.       The    well-to-do    mechanic    has 
been   adding    to   his   by  deposits  in  the  savings-bank. 
The  citizen    that    has  accumulated    investments  to    the 
amount    of    ten    thousand    dollars,   has    been   endeavor- 
ing, by  a  life  of   self-denial,  to  increase  those  invest- 
ments   to   a    hundred    thousand.       lie    that    1ms    had    a 
hundred   thousand   has   been    looking   forward    to  and 
laboring  to  brine:  about   the  time  when  he  could  enroll 
himself  among  the  millionnaires.     He  that  has  had  ;i 
million    has    been    hoping   and    working    to   treble   <>r 
quadruple  his  million  before  he  died.     And  Vanderbilt, 


22 

with  his  reputed  two  hundred  millions,  was  recently 
saving  up  each  year  many  millions  out  of  his  income, 
that  he  might  therewith  acquire  new  machinery  of 
production  and  distribution. 

While  there  has  been  no  attempt  to  fix  a  limit  to 
the  extent  to  which  this  mania  for  accumulating  invest- 
ments might  be  carried,  the  law  has  been  set  at  work 
to  curb  any  who  might  be  inclined  to  go  too  far  in  the 
other  direction.  He  that  has  been  desirous  of  spend- 
ing more  than  his  income,  has  been  put  under  guar- 
dianship as  a  spendthrift;  and  the  father  who  has 
feared  that  his  children  would  be  too  free  in  the  use 
of  the  investments  that  he  had  accumulated,  has 
left  his  estate  in  the  hands  of  trustees,  that  thereby 
the  possibility  of  encroachment  on  the  principal  might 
be  prevented.  Thus  men  have  gone  on  increasing 
their  investments  in  the  machinery  of  production,  un- 
mindful of  the  fact  that  such  machinery  is  valuable 
only  so  far  as  it  creates  products  for  which  there  is 
a  demand  in  the  market,  and  that  if  the  demand 
for  consumption  fails  to  keep  pace  with  production, 
the  machinery  of  production  must  be,  to  just  the  ex- 
tent by  which  that  demand  lags  behind,  superfluous, 
useless,  and  without  profit.  Men  have  acted  as  if  they 
supposed  it  to  be  possible  to  cut  down  to  the  lowest 
limits  the  consumption  of  consumable  articles,  and  at 
the  same  time  to  afford  the  largest  field  for  the 
profitable  employment  of  machinery  and  of  labor  in 
the  production  of  those  consumable  articles. 

Under  these  circumstances  it  is  surely  no  wonder 
that  machinery  has  been   created   with   a  capacity  of 


23 


production  far  in  excess  of  the  demands  of  the  mar- 
ket for  its  products,  and  that  products  of  all  kinds 
have  actually  been  created  in  excess  of  those  demands, 
—  in  a  word,  that  general  over-production,  with  its 
train  of  resulting  evils,  has  become  an  existing  fact. 
Products  of  all  kinds  have  filled  the  markets  in  continu- 
al lv  increasing  quantities,  while  the  market  demand 
for  those  products  has  fallen  short  of  a  corresponding 
increase  by  reason  of  the  non-existence  of  an  in- 
creased ability  in  all,  the  rich  as  well  as  the  poor,  to 
purchase  the  products,  —  the  ability  of  the  rich  hav- 
ing been  restricted  by  the  loss  of  the  dividends  from 
their  investments,  and  by  the  loss  of  the  profits  of 
business  generally;  while  the  ability  of  the  poor  has 
been  cut  down  by  lowered  wages  and  by  the  want 
of  employment  due  to  the  closing  of  factories,  to  the 
stoppage  of  operations  for  the  creation  of  new  ma- 
chinery of  production  and  distribution,  and  to  the 
smaller  calls  made  by  all  kinds  of  business  for  the 
assistance  of  labor. 

One  peculiar  instance  of  the  correspondence  of 
observed  facts  with  results  to  be  anticipated  theoreti- 
cally, remains  to  be  mentioned.  If  the  recent  depres- 
sion in  trade  has  resulted  from  over-investment  and 
consequent  over-production,  any  particular  country, 
tin'  circumstances  of  which  had  given  exceptionally 
large  opportunities  \'<>v  investment  and  for  consump- 
tion, might  be  expected  t<>  have  been,  in  comparison 
with  other  countries,  relatively  exempt  from  the  <'\il 
symptoms  of  the  depression.  Fortunately  for  our 
argument,    the    history   of    recent    years    furnishes   a 


24 

striking  example  of  exactly  this  phenomenon.  At 
the  conclusion  of  the  war  between  France  and  Ger- 
many, the  former  country  was  left  with  its  territory 
devastated  by  the  armies  which  had  fought  within 
its  borders,  -  -  its  factories,  its  warehouses,  its  dwell- 
ings, and  its  railroads  had  been  laid  waste.  Germany, 
however,  had  suffered  comparatively  little  ;  the  war 
had  not  been  fought  on  its  soil,  and  the  expenses 
which  it  had  incurred  had  been  in  large  part  repaid 
to  it  by  the  millions  of  the  indemnity  which  it  had 
extorted  from  its  fallen  foe.  But  notwithstanding  all 
these  facts,  which,  according  to  all  accepted  principles 
of  political  economy,  ought  to  have  caused  the  war 
to  be  followed  by  prosperity  in  Germany  and  by  dis- 
tress in  France,  history  shows  that  it  was  Germany 
that  suffered,  while  France  prospered,  —  the  general 
depression  in  trade  at  that  time  having  been  felt  more 
severely  in  Germany  than  in  England  or  in  the  United 
States,  while  France  was  wholly  exempt  from  it,  all 
her  people  being  able  to  find  work  and  employment 
in  repairing  and  making  good  the  waste  of  the  war. 
We  believe  that  this  fact,  though  easily  explained 
upon  the  theory  which  is  here  advanced,  is  wholly 
inexplicable  upon  any  other  theory  that  has  ever 
been  suggested. 

Before  leaving  this  branch  of  our  subject  it  may 
be  well  to  suggest  that  the  views  here  presented  in- 
volve no  denial  of  the  fact  that  the  desire  to  acquire 
income-producing  investments  is  an  element  of  the 
greatest  importance  for  the  development  of  human 
progress.     Substantially  all  the  advance  that  has  thus 


25 

far  been  made  in  civilization  has  been  built  on  this 
foundation.  The  only  claim  here  presented  is  that 
this  element  may,  like  almost  everything  else  in 
human  affairs,  be  so  excessive  in  amount  as  to  be, 
for  a  time  at  least,  mischievous  rather  than  benefi- 
cial in  its  effects.  One  need  not  be  supposed  to 
deny  the  benefit  or  the  necessity  of  food  for  the 
human  body,  because  he  claims  that  the  gratifica- 
tion of  an  inordinate  desire  for  food  mav  result  in 
injur}'  to  health,  or  even  in  the  destruction  of  life 
itself. 

If  the  arguments  and  conclusions  set  forth  in  the 
preceding  pages  are  sound,  many  questions  arise  as 
to  the  future  workings  of  the  natural  laws,  the  exist- 
ence of  which  we  have  sought  to  establish,  and  as  to 
the  possible  remedies,  if  any  there  are,  for  the  present 
troubles.  The  doctrine  of  the  impossibility  of  general 
over-production  is  one  that  lies  at  the  basis  of  the 
whole  of  the  accepted  system  of  political  economy; 
and  if  the  doctrine  is  proved  to  be  false,  the  greater 
pari  of  that  system  will  have  to  be  reconstructed. 
Mill  himself  says:  "The  point  is  fundamental;  any 
difference  of  opinion  on  it  involves  radically  different 
conceptions  of  political  economy,  especially  in  its 
practical  aspect.  On  tin;  one  view,  we  have  only 
to  consider  how  :i  sufficient  production  may  he  com- 
bined with  the  best  possible  distribution;  hut,  on  the 
other,  there  is  ;i  third  thing  to  he  considered,  —  how 
;i  market  can  be  created  tor  produce,  or  how  pro- 
duction   can    lie    limited    to    the    capabilities    of    the 


26 

market."  '  If,  as  we  have  endeavored  to  prove,  it  is 
possible  that  there  should  exist  a  production  which 
should  for  a  time  be,  in  its  general  aggregate,  in  ex- 
cess of  the  demands  of  the  market,  it  is  evident  that, 
as  Mill  asserts,  many  new  questions,  which  have  here- 
tofore been  ignored  by  the  economists,  come  to  the 
front  and  call  for  an  answer;  and  if,  as  we  claim  is 
the  fact,  production  has  in  recent  years  exceeded 
the  demand  for  consumption,  whereby  much  em- 
barrassment to  business  and  much  suffering  for  the 
laboring-classes  have  resulted,  it  is  evident  that  the 
even  balance  that  should  be  kept  between  produc- 
tion and  the  demand  for  consumption  cannot  be  re- 
stored unless  either  the  latter  element  is  increased, 
or  the  former  one  diminished. 

There  are  evidently  many  ways  of  reaching  either 
of  these  results.  On  the  one  hand,  the  demand  for 
consumption  may  be  increased  by  the  action  of  gov- 
ernment through  the  waging  of  costly  and  destruc- 
tive wars,  the  maintenance  of  large  armies  and 
navies  in  time  of  peace,  or  the  erection  of  costly 
public  buildings  and  public  works.  It  may  be  in- 
creased by  the  richer  classes  through  a  more  liberal 
expenditure  on  luxuries,  or  through  a  more  generous 
use  of  their  wealth  in  the  distribution  of  charities 
among  the  poor.  It  may  be  increased  by  the  poorer 
classes  through  a  fuller  enjoyment  of  the  comforts 
of  life ;  but  this  mode  of  increase  is  not  directly 
dependent  on  the  simple  volition  of  the  persons  com- 
posing   those    classes,   for    before    they    can    increase 

1  Mill's  Elements  of  Political  Economy,  Book  III.  ch.  xiv.  sect.  4. 


27 

their  demand  for  consumption,  it  is  necessary  that 
they  should  receive  larger  wages  than  at  present,  or 
at  least  washes  which,  if  not  larger  as  measured  in 
dollars,  will  be  larger  in  purchasing  power.  Finally, 
the  demand  for  consumption  may  be  increased  through 
the  opening  of  new  fields  for  the  investment  of  capital, 
—  as,  for  example,  if  a  new  mode  of  transportation 
should  be  invented  which  should  serve  as  a  substitute 
for  railroads. 

On  the  other  hand,  production  may  be  diminished ; 
and  this  also  may  be  accomplished  in  various  ways. 
Production  may  be  diminished  through  the  destruc- 
tion of  the  machinery  of  production  and  distribution 
by  war,  riots,  floods,  or  conflagrations.  It  may  be 
diminished  through  the  refusal  of  mankind  to  avail 
itself  of  the  assistance  of  labor-saving  machinery.  It 
may  be  diminished  by  the  enforced  idleness  of  large 
classes  of  people,  as  by  preventing  convicts  in  prisons 
from  performing  any  useful  labor,  or  by  the  tempo- 
rary closing  of  factories  and  the  temporary  stoppage 
of  machinery.  This  closing  of  factories,  however, 
though  it  has  been  practically  tried  more  than  any 
other  Bupposed  remedy,  is  liable  to  the  objection  that, 
while  diminishing  production,  it  reacts  upon  and  at 
th<'  same  time  diminishes  the  demand  for  consump- 
tion ;  For.  by  throwing  Large  numbers  of  working 
people  out  of  employment,  and  thereby  depriving 
them  of  the  means  of  purchasing  the  articles  which 
they  desire,  the  demand  for  consumption  is  dimin- 
ished, and  the  total  result  of  the  process  may  well 
he   to  increase  the  disproportion    between   production 


28 

and  the  demand  for  consumption,  rather  than  to  lessen 
it.  Finally,  production  may  be  diminished  by  reduc- 
ing the  hours  of  labor  through  the  adoption  of  eight- 
hour  laws  or  otherwise. 

Most  of  these  methods  of  increasing  the  demand 
for  consumption  or  of  diminishing  production  are  lia- 
ble to  evident  objections  that  prove  them  remedies 
to  be  avoided  rather  than  sought  for,  —  remedies 
which  are  in  fact  worse  than  the  disease  which  we 
wish  to  cure.  There  are,  however,  two  of  these  sug- 
gested modes  of  relief  which  may  wrell  engage  our 
attention.  If  we  can  hope  to  relieve  the  troubles 
of  the  time  by  increasing  the  consumption  of  the 
good  things  of  life  by  the  poor,  or  by  reducing  their 
daily  hours  of  labor;  or  by  a  combination  of  these 
two  remedies,  whereby  the  poor  shall  both  enjoy 
more  and  work  less,  —  have  more  to  enjoy,  and  more 
time  to  enjoy  it  in,  —  we  surely  shall  have  reached 
a  result  much  to  be  desired.  If,  however,  the  res- 
toration of  the  equilibrium  between  production  and 
the  demand  for  consumption  is  not  gained  in  any 
other  way,  it  will  necessarily  be  reached  at  last  by 
the  decrease  in  the  desire  for  income-producing  in- 
vestments, which  must  follow  a  large  decrease  in  the 
amount  of  income  derivable  from  those  investments. 
If,  by  reason  of  the  over-crowding  of  the  field  of 
investment  and  the  consequent  competition  between 
the  owners  of  the  various  kinds  of  invested  property, 
the  usual  rate  of  annual  returns  from  such  property 
shall  be  reduced  to  one  or  two  per  cent,  many  per- 
sons will  feel  that,  rather  than  save  a  thousand  dollars, 


29 

for  instance,  for  the  sake  of  the  ten  or  twenty  dollars 
of  annual  income  to  be  derived  from  it,  they  will  do 
better  if  they  spend  their  thousand  in  articles  of 
present  enjoyment,  —  if  they  make  sure  of  a  large 
present  good  rather  than  trouble  themselves  with 
efforts  to  secure  what  can  at  best  be  but  a  trifling 
income  for  their  later  years. 

Nor  should  we  overlook  the  fact  that  the  process 
of  the  reduction  of  the  rate  of  income  to  be  derived 
from  invested  property,  though  bringing  us  in  the 
course  of  its  development,  as  we  have  endeavored  to 
show,  to  times  of  general  distress  for  all  classes,  is, 
in  its  final  result,  a  beneficent  process.  A  reduction  in 
the  rate  of  income  from  invested  property  means  in 
the  final  analysis  that  the  world  pays  less  than  it  has 
before  been  paying  for  the  use  of  its  machinery ; 
that  labor  is  obtaining  a  larger  share,  and  capital  a 
smaller  share  of  the  compensation  paid  for  produc- 
tion ;  that  of  the  price  of  every  article  purchased 
for  consumption  by  the  rich  or  by  the  poor,  a  greater 
proportion  goes  to  pay  for  the  labor,  whether  of  hand 
or  of  Inain,  that  has  been  expended  in  its  production 
or  transportation,  and  less  for  the  use  of  the  machin- 
ery which  lias  helped  to  produce  it  or  to  transport 
it  to  the  consumer.  The  evils,  then,  which  result  from 
an  excessive  investment  of  capital  in  machinery  are 
only  temporary.  The  evils  of  general  over-produc- 
tion, of  glutted  markets,  and  of  enforced  idleness  and 
consequent  u;mt  among  the  poor,  are  only  the  re- 
sults of  tin-  irregular  flowing  <>!  a  stream  whose 
genera]    course    tends   surely    towards    the    improve- 


30 

ment  of  mankind  and  the  lessening  of  the  inequali- 
ties between  the  rich  and  the  poor.  It  has  been  the 
purpose  of  this  essay  to  show  how  the  irregularities 
in  the  flow  of  this  stream,  the  temporary  chokings 
of  its  current,  have  been  caused,  and  how  depression 
in  trade  has  resulted  from  these  irregularities  in  the 
working  of  a  process  which,  if  it  were  regular,  could 
operate  only  to  the  good  of  mankind.  Our  theory 
teaches  us  also  that  mankind,  in  failing  to  avail  itself 
more  fully  of  the  facilities  for  comfort  and  for  enjoy- 
ment which  a  full  use  of  its  machinery  and  of  its 
laboring  men,  anxious  for  employment,  would  give, 
is  almost  wantonly  wasting  its  opportunities.  If  such 
be  the  fact,  to  find  out  and  to  promote  the  means 
best  fitted  to  bring  this  waste  to  an  end  is  surely  a 
subject  most  worthy  of  our  thought  and  our  labor. 


APPENDIX. 


"'HERE   are  several  collateral  results  of  the  views 
developed  in  this  pamphlet  to  which  it  may  be 
well  briefly  to  refer. 

First.  It  may  be  remarked  that  although  in  the  future 
a  largely  increased  demand  for  the  machinery  of  production 
and  distribution  may  be  brought  about  by  a  general  in- 
crease in  the  wages  of  labor,  or  by  other  causes,  the  desire  to 
obtain  income-producing  investments  is  so  powerful  and  so 
general  among  all  classes  of  people  that  it  is  probable  that  the 
field  of  investment  will  hereafter  remain  permanently  over- 
crowded, except  when  it  may  be  cleared  for  a  time  by  the 
destruction  due  to  a  great  war,  or  by  an  invention  which 
shall  call  for  a  large  investment  of  capital  in  a  new  kind  of 
machinery.  Such  over-crowding  must  mean  great  competi- 
tion within  the  field,  wherever  competition  is  possible,  and 
great  competition  must  mean  small  profits  for  the  competitors. 
Manufacturing  business,  therefore,  in  the  future,  when  it 
bas  no  monopoly,  but  is  open  to  the  competition  of  all  com- 
ers, may  be  expected  to  return  only  small  profits.  Railroads, 
however,  when  free  from  competition,  as  they  must  often  be, 
and  when  free  also  from  legislative  interference,  may  be  ex- 
pected to  pay  large  dividends,  tor  their  business  must  con- 
tinue to  increase  in  volume.  For  real  estate,  advantageously 
situated,  a  Large  increase  in  value  may  be  anticipated,  unless 
too  great  a  portion  of  the  rents  is  taken    by  taxation   to  be 


32 

wasted  or  squandered  by  incompetent  or  corrupt  govern- 
ments. Under  such  circumstances  money  can  of  course 
command  only  low  rates  of  interest.  Periods  of  relief  from 
this  general  condition  of  affairs  may,  however,  be  expected 
to  occur  whenever  people  are  led  (as  they  were  in  1881  and 
1882)  to  make  a  sudden  and  general  move  in  the  direction  of 
accumulating  stores  of  manufactured  products  in  preparation 
for  an  anticipated  rise  in  their  value.  But  any  such  period 
must  always  be  followed  by  a  time  of  reaction,  when  a  gen- 
eral desire  to  dispose  of  the  accumulations  will  glut  the  mar- 
kets with  the  products  that  have  been  accumulated,  and  thus 
will  interfere  with  the  regular  disposal  of  the  usual  products 
of  the  year. 

Second.  Another  consideration  resulting  from  the  views  set 
forth  in  this  pamphlet  is  this :  If  the  closing  of  factories  and 
the  throwing  of  laborers  out  of  employment  finds  its  original 
cause  in  an  excessive  desire  on  the  part  of  the  general  pub- 
lic to  acquire  income-producing  investments,  it  would  seem 
that  the  sufferers  from  the  results  thus  brought  about  might 
fairly  have  some  claim  on  that  public,  as  represented  in  and 
by  the  government  of  the  state  or  nation,  for  relief  from  the 
suffering  thus  created.  If  the  action  of  the  community  as  a 
whole,  through  the  general  excess  of  the  desire  to  accumu- 
late, is  such  as  to  leave  labor  unemploj-ed  and  starving  in 
the  midst  of  abundance,  may  not  the  idle  and  starving  labor- 
ers fairly  claim  that  the  government,  which  represents  the 
community  at  large,  shall  find  and  supply  them  with  that 
employment,  that  means  of  earning  a  livelihood,  which  indi- 
viduals have  failed  to  furnish?  A  new  light  is  thus  thrown 
on  the  question  of  the  policy  of  establishing  public  work- 
shops and  carrying  on  public  improvements  for  the  purpose 
of  giving  employment  to  the  idle.  The  objections  to  such 
measures,  on  grounds  not  here  noticed,  may  be  insuperable  ; 
but  the   above    considerations  afford  a  strong  argument   in 


33 

support  of  the  view  that  under  certain  circumstances  it  may 
be  the  duty  of  a  government  to  relieve  public  distress  in 
this  way. 

Third.  It  may  be  remarked  that  the  theor}^  here  ad- 
vanced suggests  a  way  in  which  a  protective  tariff  may  bene- 
fit the  country  which  imposes  it.  If  a  country,  on  account 
of  its  undeveloped  condition,  or  for  any  other  reason,  affords 
greater  opportunities  and  a  larger  field  than  other  countries 
for  the  profitable  investment  of  capital,  it  may,  by  lim- 
iting as  far  as  possible,  through  tariffs  or  otherwise,  its 
communication  with  those  countries  where  the  field  of  invest- 
ment has  been  more  crowded,  postpone  the  time  when  the 
effects  of  the  competition  among  investors  will  cause  depres- 
sion in  trade  and  general  distress  within  its  own  borders. 
Perhaps,  however,  this  merely  shows  that  a  country  may  by  a 
protective  tariff  delay  the  march  of  its  own  progress  in  civil- 
ization, and  thereby  postpone  the  time  when  it  is  to  suffer 
from  some  of  the  necessary,  though  unpleasant,  incidents  of 
that  progress. 

America,  with  its  less-crowded  field  for  investment,  may, 
by  a  tariff,  prevent  the  capital  of  Great  Britain  from  compet- 
ing with  its  own  capital  on  equal  terms,  and  may  thereby 
keep  its  rate  of  income  from  investments  up  to  a  higher  figure 
than  the  English  rate.  In  ocean  commerce  English  and 
American  capital  have  competed  on  exactly  equal  terms  ;  and 
the  former,  being  the  cheaper  capital,  —  that  is,  the  capital 
thai  was  content  with  the  lower  rate  of  interest, —  has  neces- 
sarily driven  nut  of  the  field  the  dearer  capital  of  America. 
So  if,  by  the  removal  of  existing  duties.  English  capital  shall 
be  enabled  to  comjpete  in  American  markets  in  the  produc- 
tion of  any  given  article  of  manufacture,  with  (inly  a  slight 
item  of  ili'-  cosl  of  transportation  from  England  t<>  America 
operating  against  it.  it  may  be  expected  (<>  be  < •< j  1 1 :i II %■  ef- 
fectual in  driving  American  capital  out  of  thai   field,  or  ;ii 


34 

leas-t  in  forcing  it  to  be  content  with  a  lower  rate  of  profit 
than  it  had  previously  been  accustomed  to.  But  while  this 
latter  result  might  be,  for  reasons  before  stated,  in  certain 
ways  productive  in  the  end  of  good,  it  would,  for  a  time,  at 
least,  cause  a  stoppage  of  our  factories,  a  dismissal  of  our 
laborers  from  employment,  and  a  general  disturbance  in  our 
prosperity. 

The  general  movement  which  has  lately  begun  in  the  prin- 
cipal nations  in  favor  of  protective  taiiffs  is  a  natural  result 
of  the  desire  to  avoid  the  evil  effects  of  over-production. 
Each  nation  has  been  endeavoring  to  sell  its  superfluous  pro- 
ducts to  its  neighbors,  while  each  neighbor  has  felt  that  any 
foreign  products  which  were  admitted  within  its  borders 
tended  only  to  increase  its  own  glut  of  products,  to  destroy 
the  profits  of  its  manufacturers,  and  to  lower  the  wages  of  its 
laboring-men.  Under  these  circumstances  it  has  readily 
seemed  to  be  the  true  policy  of  each  nation  to  receive  as 
little  as  possible  of  the  products  of  other  nations,  and  at  the 
same  time  to  supply  other  nations  with  the  largest  possible 
amount  of  its  own  products.  Such  a  policy  might,  for  a  time 
at  least,  help  the  nation  that  should  adopt  it,  if  other  nations 
did  not  retaliate  by  the  adoption  of  a  similar  policy.  But  if  a 
protective  policy  is  generally  adopted  by  the  principal  nations, 
as  present  indications  suggest  that  it  may  be,  the  only  result 
will  be  that  each,  while  it  secures  the  whole  of  its  own  mar- 
ket, will  lose  the  foreign  markets  for  its  products ;  and  thus 
no  one  nation  will  make  any  gain  on  the  whole,  except  that  if 
it  has  been  receiving  from  abroad  more  products  than  it  has 
sent  abroad,  it  may  relieve  or  delay  for  a  time  the  mischiefs 
of  over-production  within  its  own  borders. 

Fourth.  The  theory  presented  in  these  pages  throws  a 
new  light  on  a  question  that  has  of  late  been  much  mooted ; 
namely,  that  of  the  policy  of  restricting  immigration.  If 
the  people  of  the  United  States  have  been  suffering  from  a 


35 

general  over-production  which  has  rendered  it  for  a  time 
impossible  for  large  numbers  of  our  laboring-classes  to 
obtain  employment,  it  is  evident  that  this  mischief  must  be 
intensified,  and  that  any  distress  inflicted  on  our  laborers  by 
their  want  of  employment  must  become  sharper  and  more 
widespread  if  additional  laborers  are  brought  from  abroad 
to  compete  with  and  to  take  the  places  of  the  laborers  previ- 
ously here.  This  view  of  the  question  is  in  accord  with 
that  taken  by  the  laboring-classes  themselves,  who  have  felt 
the  effects  of  the  competition  of  the  newly  imported  labor- 
ers. Political  economy,  however,  has  taught  that  this  is 
only  a  superficial  view  of  the  matter,  and  that  a  more  thor- 
ough understanding  of  the  subject  should  satisfy  us  that 
every  addition  to  a  nation's  muscle,  able  and  willing  to 
labor,  must  necessarily  and  under  all  circumstances  be  benefi- 
cial to  the  nation.  Our  theory  shows  that  the  popular  view 
is  not  so  faulty  after  all,  and  that,  under  such  circumstances 
a-  have  recently  existed,  an  added  force  of  imported  laborers 
may  for  a  time  work  injury  rather  than  benefit. 

Fifth.  The  fact  that  the  mischievous  consequences  of 
general  over-production  are  being  developed  at  a  time  when 
the  laboring-classes  (who  are  the  chief  sufferers  from  it)  are 
beginning  to  find  that  the  actual  control  of  the  world  is  in 
their  hands,  it'  they  only  have  the  inclination  and  (lie  intelli- 
gence to  grasp  that  control,  is  an  important  element  not  t>» 

lost  sight,  of  in  any  consideration  of  the  subject.  The 
laborin  sea  are   everywhere  struggling  in  a   blind  way 

bring  about  some  amelioration  <>f  theii  social  condition, 
and  there  will  always  be  leaders  ready  to  turn  their  honest 
efforts  I'm-  that  end  to  tie-  work  of  murder,  rapine,  and  anar- 
chy. Those  who  would  keep  the  masses  back  from  following 
these  leaders  musl  be  prepared  to  hold  out  to  them  some 
hope  of  relief  from  their  troubles.  If  all  that  the  educated 
classes,  if  all  that  political  science,  can  say  to  the  poor  and 


36 

the  ignorant  is  that  they  must,  by  reason  of  some  past  errors 
of  legislation  concerning  the  currency  or  the  tariff,  submit 
to  starve  in  the  midst  of  abundance,  we  may  well  fear  that 
there  will  be  shortly  a  sudden  upheaval  and  an  outburst  of  ter- 
rible forces.  There  is  no  subject  calling  more  urgently  for 
immediate  and  careful  study  to-day  than  this  of  the  causes 
of  the  present  labor-troubles;  but  the  subject  is  a  difficult 
one,  and  there  is  a  very  general  disinclination  to  discuss  it 
except  in  the  most  superficial  manner.  Educated  people 
suppose  that  the  professors  of  political  economy  have  a  thor- 
ough knowledge  of  the  whole  matter,  and  that  this  knowl- 
edge is  so  deep  and  so  abstruse  that  it  cannot  be  acquired 
by  those  who  have  not  made  a  special  study  of  economic 
science.  The  professors,  on  the  other  hand,  go  blindly  ahead, 
working  out  their  old  regulation  theories,  unwilling  to  re- 
examine the  foundations  of  those  theories,  and  turning  aside 
with  silent  contempt  from  any  one  who  suggests  that  there 
are  truths  in  economic  science  of  which  they  are  as  yet 
ignorant. 

There  is  much  in  the  present  condition  of  affairs  that  sug- 
gests a  comparison  with  the  condition  of  France  prior  to  the 
great  Revolution  of  1789.  Then,  as  now,  social  inequalities 
had  become  strongly  marked  and  exceedingly  offensive.  The 
masses,  in  their  blind  struggle  to  overthrow  the  "  divine 
rights  "  of  kings  and  the  privileges  of  the  nobility,  burst 
all  barriers  and  created  for  a  time  a  reign  of  terror.  The 
result  was,  however,  in  the  end  a  large  recognition  of  the 
equal  rights  of  men  throughout  the  civilized  world.  Since 
that  time,  and  until  recently,  men  have  had  fair  opportunities 
to  create  their  own  position  in  the  world,  to  rise  by  their  own 
exertions  from  the  lowest  to  the  highest  ranks.  But  latterly 
a  new  barrier  has  been  growing,  and  the  distance  betwreen  the 
rich  and  the  poor  has  been  widening.  Vanderbilt,  Gould,  and 
a  few  others,  have  seemed  to  be  in  a  fair  way  to  absorb  into 
their  own  possession  all  the  income-producing  wealth  of  the 


37 

country, — at  least  all  that  large  part  of  it  which  takes  the 
form  of  the  ownership  of  railroads  ;  while  great  numbers  of 
the  poor  have  been  so  situated  that,  though  anxious  to  earn 
their  living,  and  though  surrounded  by  abundance,  they  have 
been  forced  to  starve  in  idleness.  Can  it  be  expected  that 
now,  any  more  than  in  1789,  the  masses  will  submit  quietty 
to  a  lot  of  suffering  and  privation  which  they  feel  is  due  to 
no  fault  of  their  own,  while  wealth,  and  the  comforts  and 
luxuries  which  wealth  gives,  concentrate  themselves  in  the 
hands  of  a  few,  and  those  few  apparently  not  the  most 
deserving?  It  is  to  be  hoped  that  the  vis  medicatrix  naturae 
will  soon  cure  our  present  troubles,  and  that  an  improved 
condition  of  the  masses  will  come  without  active  interference 
from  any  man  or  body  of  men  ;  but  if  relief  does  not  come 
in  this  way,  if  an  application  of  the  heartless  laissez-faire 
principles  of  the  economists  does  not  soon  work  out  re- 
lief, we  may  expect  to  hear  of  vigorous  efforts  on  the  part 
of  the  sufferers  to  obtain  that  relief  by  violent  measures. 
The  recent  riots  in  London  and  in  Belgium,  the  strikes  and 
boycottings  in  England  and  in  this  country,  the  threatenings 
of  murder  and  rapine  by  Socialists  and  Anarchists,  may  be  but 
the  mutterings  before  a  storm  that  is  to  break  upon  us  as 
unexpectedly  as,  to  the  great  body  of  our  people,  the  fierce 
storm  of  our  Civil  War  broke  upon  and  swept  over  a  country 
to  which  such  horrors  had  been  so  long  unknown  that  they 
seemed  an  impossibility  within  its  borders. 


i86440 


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